Just about all home-buyers have this question when they start considering buying a home. It makes sense, too, because who wouldn’t want to know the difference between the cost of building a house vs buying an existing home?
There are a lot of factors that go into your decision and the more knowledge you have about your options, the better it will be for you.
Is Building a House More Expensive Than Buying?
This is an interesting question because the truth of the matter is that the answer varies widely depending on your area. What we can tell you is what the average person can expect coming from an average area of the country.
Buying an existing home is typically less than buying a new home on a per-home basis, but not necessarily per square foot. As an example, on Realtor.com, it appears that a 1,500 square foot is going to run somewhere around $148 per square foot. Alternatively, a new home of the same size is going to be around $103 per square foot.
With that said, most older homes are smaller than the newest, more spacious homes. When you take that under consideration, an older home will be priced at approximately $220k. A newer home that is typically over 2,200 square feet, you can expect to pay upwards of $250k or more depending on upgrades. That’s a considerable amount over the older home.
Other Expenses You Don’t Always Think About
Older homes also have more costs associated with them as time goes by compared to a newer home. That means that you’re going to have to pay more in maintenance costs for older homes, and that can include an HVAC system, water heater, furnace, or possibly a roof.
Each of these extra repairs that are part of owning an older home can result in costs of more than $5000 per replacement depending on unit, size, or brand. With a newer home, none of these are expenses that you’ll have to pay out of pocket as they are all covered under builder warranties.
Landscaping Costs Money, Too
Existing homes have mature landscaping. Trees and shrubbery have had time to establish themselves in older neighborhoods and therefore look far more attractive than new builder landscaping. That alone can add a significant amount to your property value.
New homes, however, do not have that kind of landscaping without some extra money and input from you. Quite literally, you have to pay for any improvements on your own if you want to add vegetation to your home and it isn’t cheap.
How Much Can It Cost to Buy Land and Build a House?
According to Home Advisor, the average cost to build a new 2,000 square foot home is approximately $290,110. There is a whole list of issues that can cost some serious cash in everything from land and excavation through stories, shape, roof, appliances, and more.
Home Advisor offers a fabulous breakdown of the average costs you can expect to include labor costs, too. If you’re interested in custom-building a home, you need to hire an architect, engineers, and land surveyors to the tune of a few thousand dollars just to get started.
Foundations cost several thousand all by themselves. Then you add framing, walls, roofing, windows, and major systems installation. The systems installations are going to be where you will spend the most money next to the interior finishing that includes insulation, lighting, appliances, and more.
What About Building a House or Buying a Manufactured Home?
Manufactured homes are not the mobile homes of decades past. There has been a huge improvement to the way manufactured homes have become an opportunity for homeownership since the 1970s. Before then, there were no real regulations to provide safety standards for people.
Over time, manufactured homes have evolved to look like site-built homes. They have garages, second stories, and energy-efficient appliances just like a standard home. Manufactured homes are also considerably less expensive as many are under $100,000 for homes of comparable size.
Unfortunately, the stereotype still exists when manufactured homes are discussed, and trailer parks still have a negative connotation. Research indicates that the perceived property value and actual property value are markedly different. Manufactured homes don’t actually impact property value the way older mobile homes did before.
Is Remodeling an Older Home a Cost-Effective Alternative?
This is another common question as homeowners discuss the cost of building a house vs buying an existing house. The question revolves around whether or not they should renovate the home they are currently in, move to an older home and renovate, or build a new home and make it the way you want it.
Other circumstances can dictate what you decide, too. Do you want to stay in your current neighborhood? Do you want to move to a different neighborhood? Can you make the improvements that you’d like in your existing home?
Considering Your Budget
Once you answer those questions, the next thing you need to consider is your budget. Is it going to cost more or less for you to renovate your existing home? Is the work worth the cost to the home, or would it make more sense for you to purchase an existing home?
This is a significant concept to think about. Just because you want to pour $35,000 into a home renovation, that doesn’t mean that it will add value to your home. If your home is only capable of appraising for $250k at the most and you owe $230k, if you spend $35k in renovations, then you will probably never make all of that money back.
On the other hand, you could always sell your existing house without renovations and get several thousand back. Then you can add those thousands to the $35k you have set aside for renovations and instead add it to a down payment for a different house that has what you want.
Once you have that figured, you’ll be well on your way to deciding which route is more cost-effective for your particular situation.
Creating a Checklist for the Cost of Building a House vs Buying One
We’ve compiled and borrowed a checklist of questions you need to ask yourself to help you decide if you want to take on the cost of building a new house, buying one, or renovating the one you have. Read through them and answer them as truthfully as you can to help you go in the right direction.
These questions should at least get you started, but feel free to add extra questions as you go along because more are bound to pop up.
Making Your Decision
The decision to build or buy is not one that should be taken lightly. After some discussion, you may realize that you don’t want to do either, and instead, you’d prefer to renovate.
Each situation is as unique as the people that own the home, so you need to find the answers that work for you. Don’t let someone else tell you what to do because ultimately, you’re going to have to live with the choice you make, so better make sure you and your family are happy with your decision.